Section 7 Conditional Sales as Secured Transactions

• Library: Secured Transactions 2005

Occasionally, a situation will arise in which a private seller attempts to sell a vehicle to a private buyer in the form of a conditional sale, by which the seller holds the title to the vehicle while the buyer drives, maintains, and insures the vehicle and makes payments to the seller. If the buyer then files a bankruptcy, or if a lien creditor levies execution on it, Article 9 provides that there is a secured transaction, and the lack of any perfection of a lien will render the rights of both parties subject to avoidance and sale by a bankruptcy trustee. Section 400.9-202, RSMo Supp. 2004, makes the focus of title immaterial when a transaction is at issue: “Except as otherwise provided with respect to consignments or sales of accounts, chattel paper, payment intangibles, or promissory notes, the provisions of this article with regard to rights and obligations apply whether title to collateral is in the secured party or the debtor.” Section 400.9-202. Furthermore, the definition of “security interest” states that a seller’s attempt to reserve title after delivery of goods to a buyer is the creation of a security interest. Section 400.2-401(1), RSMo Supp. 2004. “The retention or reservation of title by a seller of goods notwithstanding shipment or delivery to the buyer (section 400.2-401) is limited in effect to a reservation of a ‘security interest’.” Section 400.1-201(37), RSMo Supp. 2004. Section 400.2-401(1) bolsters the definition by providing in part as follows: “Any retention or reservation by the seller of the title (property) in goods shipped or delivered to the buyer is limited in effect to a reservation of a security interest.” And to drive the point home, § 400.2-401(2) states in part:

Unless...